the future of banking is engagement banking...the future of banking is engagement banking, ovember...

November, 2012

The Future of Banking is Engagement Banking

Discover BackbaseThis white paper is brought to you by Backbase – the

Bank 2.0 Specialist. Please contact us for more

information: [email protected].

2

Introduction

A customer’s satisfaction with

a bank’s website is strongly

connected to his or her overall

engagement with the bank.

“Using Technologies to Engage

Retail Banking Customers,”

Gallup Consulting, White Paper 2008

Banking is not some place you go,

banking is something you do!

Brett King, author Bank 2.0

Banks are facing rapid change. Customer behavior, technology

and competition are all in transition. The most challenging part?

It’s all happening at the same time.

Companies like Facebook have made the world social and given the customer a voice. Only

three years ago Apple launched the iPad, and created a whole new product class. Tablets

and smartphones are taking the world by storm, soon eclipsing traditional PC sales. And

in a move that no one could have predicted even five years ago, companies are branching

out from their native industries to compete with traditional banks. These competitors are

also composed of innovative entrants such as Simple, Movenbank, Google and PayPal — to

name only a few. Whatever their origins, all of them show that a physical banking presence

does not necessarily equal success. It also means that banks must act now to engage their

customers, or risk losing them to those who will.

Engagement BankingConnecting with your customer is essential for survival. An exceptional customer experience

creates loyalty, which in turn creates ‘brand ambassadors’. This translates directly into a

strong, enduring, bottom line. For banks to maintain their connection to the customer and

not be relegated to a commodity role in the future they must act to engage their current

customers in unique ways while also finding compelling avenues to attract new customers.

The good news is, technologically speaking, there has never been a better time to adopt an

Engagement Banking Strategy.

Valuable InsightsThis white paper will provide valuable insights aimed at outperforming the competition.

- Research about the increased use of direct channels following the financial crisis;

- Insight into how loyalty is created by engaging customers on their terms;

- Best practices taken from other industries about how to engage customers;

- Insights needed to jump the hurdles slowing down customer engagement.

Discover Backbase

Visit our website at:www.backbase.com

Interesting whitepapers at:backbase.com/bank20

Join our free webinarsbackbase.com/webinars

Contact us via

[email protected]

3The Future of Banking is Engagement Banking, November 2012

Banking will never be the same

Research shows increased use of direct channels following

the financial crisis.

The Future is Anytime, Any Place, Any Device

Fifty percent of iPhone users have

used online banking in the past

30 days. iPad and iPhone

shoppers account for 90% of all

mobile purchases; spend 19%

more per order than Android users.

“Who will Lead in Mobile

Purchasing? Apple, Google,

Facebook, Amazon, PayPal…or

your Bank?”

Javelin Strategy, 2012.

Main Points

• Fierce competition is coming

from customer engagement

champions like Google and

PayPal.

• The future of banking is mobile.

• Customer trust equals Contact

frequency times Contact quality.

The Future is MobileThe future of banking, especially when it comes to

communication, from a device standpoint will be almost

entirely about mobility. In fact, convergence in the

areas of communication, mobility, device, proximity and

search is poised to create a truly original and markedly

customer-driven banking experience. New forms of

communication have already impacted unexpected

areas of the financial world. Customers will be able to

perform the same tasks they do on their computers, on

their mobile devices. They will also be more in control of the details of the interface they use

to interact with their bank whether they are on their computer or a mobile device—with just

drag and drop—via widget technology.

Frequent Contact = Good ThingA vast majority of banking customers increased their use of direct channels after the recent

financial crisis. According to Peverelli & De Feniks, the authors of Reinventing Financial

Services, this is a good thing. They write: ‘Trust results from overall interactions. The pace

at which trust is restored is a function of the quality and frequency of interactions with

customers.’ In other words, the anytime, any place, any device attitude that customers now

have might be demanding for your current organization or systems, but serving your current

and future clients on their own terms will bring you engaged, loyal customers who will act as

ambassadors for your brand.

Pace at whichtrust is restored

Qualityof contacts

Frequencyof interactions


Loyal customers go beyond ‘nice to have’

There’s no question that banks need to fix what has become a

broken model. Growing margins can not be a replacement for

growing a customer base. The commoditization of products

within the industry is making it very difficult to compete on

price. The new entrants are experienced in building online

relationships and are used to developing and marketing

transparent products.

Engage the Customer: Create LoyaltyOne can’t afford to stop innovating in ways that can attract new customers. Satisfying a

customer’s needs without developing an emotional connection with them actually creates

no real value. Research such as that from Gallup Consulting, suggests that loyalty, too, is

questionable. In fact, measuring brand loyalty the usual way banks do, by number of repeat

purchases, misses the point. This measurement is unable to get at the ever important

emotional connection. Without knowing why a customer is purchasing a bank’s products, he

or she could simply be taking advantage of special offers or purchasing rewards, and,

just as easily could be swayed by better such offers from competitors.

The Future is About Loyalty Customers have come to expect a more personalized, interactive online experience. Their

financial provider is no exception. The more generic, transactional services offered by

most banks today are neither personal nor reflective of ever-changing technological reality.

Having established that the frequency of contact is as important in building a trusting and

loyal relationship with customers, it’s easy to see the threat to incumbents that Google,

Facebook or PayPal pose.

The Technology Democracy

In the Sixties, computers were

owned by the military, institutions

and large corporations. At home

we had calculators at best.

Twenty years later, personal IT is

surpassing corporate IT. In the

developed world most households

own multiple devices and are

able to use them for an excellent

wireless experience. Employees

get free computer training from

Facebook, YouTube, Twitter etc.,

but as a result they have come

to expect a seamless online

experience.

David Sieg, Vice President,

Strategic Marketing

YourMembership.com


Customers Punish Poor ServiceWhen a bank (or other financial) begins to re-evaluate the way that it has been interacting

with its customers, it must keep in mind that customers are accelerating their uptake of direct

channels and becoming more adventurous in their use of technology. Recent research has

found that a vast majority of banking customers has increased their use of direct channels

after the financial crisis and [most recent] recession and that they are also more focused

on service quality and personal relationships as well as more willing to punish poor service.

Customers’ increasing use of both digital and mobile channels suggests that banks will have

to find new and better ways to connect with customers. The old ways simply won’t work

anymore.

The Real Wall Street Occupation is Online

The largest financial institutions no

longer have a monopoly on the way

funds travel through the system.

Take, for example, banking alternative

Simple (formerly BankSimple), which

was co-founded by one of Twitter’s

first employees, Alex Payne.

Simple refers to its service as

“banking online” not as “online

banking.” The company is not a bank

as much as it is a personal banking

alternative. To top it all off, Simple

has made customer service the

very bedrock of its approach. When

people call for information about their

accounts, they shouldn’t have to

wait 30 minutes for someone to talk

to them.

‘The Real Wall Street Occupation is

Online,’ Dominic Basulto,

The Washington Post

Main Points

• Satisfying customer needs

without ‘emotional connection’

creates no real value.

• Customers are more willing to

punish poor service.

• Measuring brand loyalty the

way most banks do, (repeat

purchases) misses the point.


How do I connect?

The past ten years have seen the opportunities for companies

to ‘spin’ the market greatly reduced. Internet has increased

transparency and, more importantly, it has given consumers a

voice. If your product or service is below par potential customers

will find the reviews and stories, which will influence their buying

decisions.

Be Real and Create AmbassadorsOnline, financial products rank among the most researched categories. So marketing,

launching, and nurturing a successful product is no longer a matter of buying radio and

television time and print or outdoor space. Consumers will talk back and in doing so they

will determine your success. This might come across as a potential threat, but in fact it’s a

massive opportunity. If you offer a quality product at a fair price and people are happy with

their interactions with your organization, or your resellers, they will tell the world. They will, in

effect, become your media voice.

Customers Want Anytime, Any Device Self-Service Taking the customer perspective would lead to developing an Engagement Banking Strategy

that focuses on the capabilities customers want namely: Mobility, access anywhere and any

time, self-directed or self-service engagement with the bank and, simplicity, regardless of

the interaction. Reassuringly, for banks, there are plenty of examples from the retail sector to

look to when revamping their digital strategy and creating satisfying customer experiences.

Best Practices From Other Industries Engage CustomersHow then can a bank be sure it is providing what its customers really want? Short answer:

Involve them in the design and learn to think from their perspective. If you give customers

the ability to choose which services they want and the way they want them to be delivered,

the guess work disappears. Instead, customers get what they want every time while banks

gain a more valuable, personal, connection to their customers.

Main Points

• The opportunities for companies

to ‘spin’ the market are greatly

reduced.

• It is impossible to ‘fake’

customer centricity.

• Transparency, offering real

value and reaching out will be

rewarded by customers.


Get Inspiration From The BestThe top three capabilities that banks think banks should adopt

In the EFMA Accenture report “Inspiring Retailing Champions, Banking and Retailization:

Insights for Banks from the Retailing Sector” a selection of the most inspiring initiatives from

companies in the retail sector have been named and ranked.

Cross-SellingAmazon.com: for its real-time suggestions of related products, with an

algorithm so precise that it feels like a valuable suggestion and not spam.

Apple: because ‘the product IS the brand’ and its Genius application, which

uses previous purchases and preferences to derive recommendations for

other products.

Engage and EducateBMW: ‘Build your BMW CAR Configuration’ is a way to engage customers

online. Car configuration makes potential customers aware of certain

upgrades and extras and converts to customer contact. People spend time

thinking about BMW’s products and going into the dealership with a list of

extras. This makes ‘up-selling child’s play’.

Prenatal: The Europe-based maternity store Prenatal has successfully

used such strategies as linking in-store workshops on topics of interest

for pregnant mothers to thematic articles online and then to near listings

of certain products based on their individual profiles. Their soft-selling or

info-selling is rewarded with extra sales, and a deeper product and brand

awareness.

Customer-Centric EmpowermentStarbucks Coffee: has implemented an ‘Ideas in Action’ part of their blog

to allow customers to contribute ideas about new products or beverages.

Others can vote on which ones they like best. This sort of interaction benefits

both the customers, who have a say in what they can purchase, and the

company, who has the confidence it is launching a ‘requested’ product.

NH Hotels: for recognizing the need for a Customer Experience Office (CXO)

with a budget, mandate and direct CEO. They know that integrated user

experience is only going to happen if there is a dedicated officer who has

the sole focus and responsibility for the customer journey.


Implement the customer engagement vision

For the bank, the biggest challenge to joining the Engagement

Banking era lies not just in expectations or perspective, but

impediments within the banking systems and infrastructure. This

has made even the best laid plans for self-directed, customer-

relationship-development difficult at best.

Banks ‘Get’ the Vision. Can They Implement?So far, we have established the need for customer engagement; the entry-level requirement

of serving customers on any platform, any time. This creates trusting customers who will

be less willing to churn to a competitor, and who will tell others about their experience and

potentially make more purchases. Having established the need and potential benefits we

must conclude that there are some barriers to actually realizing multichannel engagement.

Most banks do have the vision to want to provide a customer-centric offering. However, they

lack the right tools and organizational structure to make it happen.

Assign a Customer Experience Owner, Fast While customers certainly stand to reap benefits from a more engaged banking experience,

one of the biggest opportunities, from the banks’ perspective, will be the trend away from

developers being in control of content and digital presence to a situation where content

managers themselves have direct control of how and when content is presented. This is

revolutionary from a bank’s marketing standpoint; cutting down significantly on go-to-market

times for campaigns and enabling multiple customer conversations. Additionally, banks will

win in a number of ways related to the time and cost savings resulting from simpler, more

ubiquitous, customer-initiated interactions.

Banks Can Learn from the Search Engine

Current banking systems have a

hard time incorporating innovations

even when they have been widely

adopted by ordinary users.

Consider, for example, search

engines. As we know, search

capabilities have radically

increased the relevance of the web

for individuals. Why, then, is it often

impossible for banks and insurance

companies to search their own

information systems to retrieve

any client information such as

addresses, signatures, accounts or

balances in the same way people

do at home?


Depend on IT to Optimize Online ChannelsFinancials are often locked-into one technology provider and therefore require an expensive

and often unnecessary revamp of a large swathe of their infrastructure in order to modernize

only their customer interactions. Yet, there are other ways to tackle these impediments to

progress. In fact, to focus on customer experience it’s possible to place a new layer on top

of existing systems without changing the underlying infrastructure to create a seamless,

satisfying customer journey while avoiding the expense and hassle of updating old systems.

Some systems enable e-business professionals to operate without having to turn to IBM,

SAP or other portal specialists for styling or making small changes to the portal. It allows

IT to focus on more strategic tasks and frees up valuable resources reducing business

dependency.

Reduce Silos and Implement a Single Customer ViewThe hierarchy and focus in most banks is based on tradition, historical turnover, and

separate channels. It’s a classic inside-out perspective. The KPI’s of managers are focused

inward and not on offering a seamless customer experience. Most banks work with ‘product

management’ responsibilities at best. Branch managers are rewarded only for turnover

related to ‘their products’ and this does not engender a response that is outward focused,

and ultimately, able to succeed in an engagement banking world.

Become More Enterprenural, Learn from Mistakes Companies like Google, Facebook, Twitter or Amazon have not led by always ‘getting

everything right’. They have become leaders by agressively pursuing growth and taking

risks. In spite of all their successes, they have left a long trail of failed initiatives. However, if

company culture is entrepreneurial and staff is encouraged to try new things, failures should

be expected. The edge lies in not dwelling on mistakes, accepting them, learning from them,

and embracing the successes that are the result of their pursuit.

Twitter-Based Hedge Fund?

In 2011, the company Derwent

Capital Markets became the first in

Europe to start a Twitter hedge fund,

which uses real-time Twitter-based

data analysis. For years investors

have widely accepted that financial

markets are driven by fear and

greed but we’ve never before had

the technology or data to be able to

quantify human emotion. Despite this,

the future of banking is less likely

to be about social networking and

more likely to be composed of more

practical functionalities such as multi-

channel access and communication.

Reinventing Financial Services,

Roger Peverelli, Reggy de Feniks,

2011

Main Points

• Reduce organizational silos and

implement a single view of the

customer.

• Dependency of business on IT

hinders optimization of online

channels.

• Become more entrepreneurial,

accept misses and invest in the

hits.


Conclusion

Banks need to evolve in order to make certain they have a place

in the future of customers’ hearts and minds. How they evolve

is going to depend on many factors. Almost any success will

depend on banks making changes to how they interface with the

customer.

Think Outside-InA customer doesn’t care that a bank has multiple product groups, business units or

fragmented IT systems. They don’t care that a mortgage application is handled by a different

division and system than where their current account balance is stored. A customer is

getting married, is becoming a parent, wants to know how much they need to save to buy

a new car or boat. In the Engagement Banking era it’s all about having the flexibility to

assemble the right information and functionality within a customer’s online journey. In the

end, the way to the customer’s heart and mind then is all about context; providing your

customer with an easy and, most importantly, relevant experience. It might not be an online

interaction that one customer wants, but rather a face-to-face one, the point is, a flexible,

outside-in thinking bank will know this—and be able to react to that customer in a unique

and relevant way.

Hearts and Minds In sum, banks are going to have to change to maintain their relationship with the customer or

risk losing out to competitors who are better able to manage the relationship. The old, inside-

out, approach does not cut it in the Engagement Banking era. In the Engagement Banking

era, banks need to put the customer first and have to make interactions with the bank easy

and intuitive. The changes they need to make can be accomplished now if they can indeed

turn their perspective from inside-out, where their own systems and needs are paramount, to

outside-in, which is the way to start thinking like the customers they want to keep.


Customer Engagement Solutions. Delivered.

We live in the Engagement Banking era where financials need to change their thinking.

Instead of the current product or system (inside-out) perspective, they must adopt a more

customer-centric or (outside-in) mindset. This isn’t easy. Applications and IT systems can be

fragmented and complex, which makes them difficult to change and makes it hard to create

a true outside-in, online experience. Backbase Bank 2.0 Portal overcomes this challenge. It

empowers financials to create outside-in customer interactions with a new, user experience

layer that links customers to the information and resources they need most.

Unlike traditional IT portal vendors, Backbase has created a modern business-driven solution that makes portal management easy for

e-business professionals. Backbase Portal Manager enables you to change your portal on the fly, whenever and however you want it.

Within the page editor you can create pages, add functionality (widgets/ mini apps), update content and forms, and target customer

segments or individual users with personalized promotions. All changes to the portal can be directly published or deployed to either a

staging or live production environment. Backbase Portal’s business focus means faster time-to-market for changes and more flexibility

to optimize online channels.

Customer SuccessOur customer-centric design enables financials to drive self-service, fuel online revenues and turn their online banking channel into

a true Customer Engagement Platform. Global financials such as ABN Amro, Al Rajhi Bank, Bank of America, Barclays, Deutsche

Bank, ING, UBS and Visa have improved their online customer interactions and maximized online customer experience, retention and

conversion by leveraging Backbase’s Bank 2.0 technology.

The Backbase team includes more than 150 senior technology and usability professionals, with offices in New York and Amsterdam.

Backbase has an extensive partner ecosystem with 1000+ skilled implementation professionals.


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Phone: + 31 20 465 8888

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Singapore 049483

Phone: (65) 6692-9110

[email protected]

Backbase delivers portal software that provides a new, user experience layer on top of underlying infrastructure and IT systems. It gives companies the opportunity to create interactions that link customers to relevant information and applications to fit their needs and preferences. With its modern, widget-based architecture Backbase Portal provides the flexibility and speed to create modern portals that truly empower the customer.

Unlike most traditional IT portal vendors, Backbase has created a contemporary, business-driven portal solution that makes portal management easy for e-business professionals. This means faster time to market and more flexibility to optimize online channels with less IT support.

The unique Backbase approach enables organizations to drive self-service, fuel online revenues and turn their online channel into a true Customer Experience Platform. Global companies such as ABN Amro, AIG, Al Rajhi Bank, Costco, GE, Barclays, ING, KPN, Motorola, ViaWest and Visa have improved their online customer interactions and maximized online customer experience, retention and conversion, by leveraging Backbase Portal.

Backbase was founded in 2003 and is privately funded with operations in New York, Amsterdam, Moscow and Singapore.

Discover Backbase

Visit our website at:www.backbase.com

Interesting white papers at:backbase.com/bank20

Join our free webinarsbackbase.com/webinars

Contact us via

[email protected]

© Copyright Backbase BV 2012Backbase is a trademark of Backbase BV in the United States, other countries or both. Other company product and service names may be trademarks or services marks of

others.The information contained in this documentation is provided for information purposes only. While efforts were made to verify the completeness and accuracy of the

information contained in this documentation, it is provided “as is” without warranty of any kind, express or implied. In addition, this information is based on Backbase’s current

product plans and strategy, which are subject to change by Backbase without notice. Backbase shall not be responsible for any damages arising out of the use of, or otherwise

related to, this documentation or any other documentation. Nothing contained in this documentation is intended to, nor shall have the effect of, creating any warranties or

representations from Backbase (or its suppliers or licensors), or altering the terms and conditions of the applicable license agreement governing the use of Backbase software.

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the future of banking is engagement banking...the future of banking is engagement banking, ovember...

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